Robert Besser
20 Apr 2025

NEW DELHI - India is preparing to scrap import taxes on U.S. ethane and liquefied petroleum gas (LPG) as part of ongoing trade negotiations with Washington, according to sources familiar with the talks.

The plan is aimed at easing India's tariff load and narrowing its trade surplus with the United States, as pressure mounts on Asian economies to address trade imbalances under U.S. President Donald Trump's tariff regime.

The proposal follows discussions to also eliminate duties on U.S. liquefied natural gas (LNG) and expand energy imports from the U.S.

India currently applies a 2.5% import tax on ethane, used primarily in petrochemical production, and on propane and butane, which are key components of cooking gas.

In fiscal year 2023-24, India imported 18.5 million metric tons of LPG valued at $10.4 billion, most of it sourced from the Middle East.

India is the world's second-largest importer of U.S. ethane after China, bringing in 65,000 barrels per day last year, U.S. Energy Information Administration data shows. China imported 227,000 barrels per day, although those volumes may fall amid the U.S.-China trade war and rising tariffs.

Reliance Industries, which operates the world's largest petrochemical complex, is India's top ethane importer.

India and the U.S. agreed in February to work towards the first phase of a broader trade deal by the end of this year. The goal is to grow bilateral trade to $500 billion by 2030 and reduce India's $45.7 billion trade surplus with the U.S.

Officials from India's commerce and finance ministries will make the final call on any tax cuts, according to the sources, who requested anonymity.

While removing duties may open the door to more imports, analysts say infrastructure limits could constrain India's ability to significantly increase ethane shipments in the short term.

"It will be challenging for the U.S. to increase ethane exports to India, as India seems to have already maximised its use of ethane as a feedstock," said Cheryl Liu of Energy Aspects, as quoted by Reuters.

India's current cracker capacity supports up to 92,000 barrels per day of ethane use.

By contrast, expanding LPG imports is more feasible, said ICRA vice president Prashant Vashisth, noting that India already imports about 60% of its LPG requirements.